The National Democratic Convention (Nadeco) in Zululand wantsUlundi's ranking to be downgraded to reduce the high municipality tariffs paid by residents.
Tutu Buthelezi, Nadeco chairman in the area, said they would present their proposal to review the grading to the local government department.
Buthelezi said the town was rated on level three on par with the income-generating Empangeni and KwaDukuza municipalities.
"The rating is too high for Ulundi," Buthelezi said. "The level is right for the likes of Empangeni, Stanger and other developed municipalities.
"This has resulted in high costs of electricity and water, while the majority of residents are unemployed."
Nadeco also lashed out at Zululand mayor Zanele Magwaza-Msibi for the poor delivery of water in sections of Ulundi.
"Ulundi only has shops," Buthelezi said. "There are no factories or huge businesses that can generate money.
"Township residents are being squeezed to pay for water and electricity, while others in areas such as Mbilane, Mkhazane, Mabedlane and Thokoza have no meters and are getting free services."
Municipality spokesman Nomusa Nhlozi said the municipality grading was done many years ago.
She said people who at present had no electricity had ignored letters of demand to pay their accounts.
"So the municipality was left with no choice but to disconnect services until people paid," Nhlozi said.